Income tax: Healey’s budget leaves thresholds frozen again. How much more will you pay?
Tax policy means freezes reduce take-home pay as earnings rise in line with inflation Income tax thresholds are set to remain frozen after John Healey’s first budget as chancellor. One of the biggest tax rises in recent years has happened without a change in the rates at which people are taxed on their incomes. Instead it has come from successive government decisions to keep the thresholds…
John Healey's first budget as chancellor has left income tax thresholds frozen, resulting in a larger tax bill for many. The freeze, previously set until 2021, now continues until 2030, impacting those earning above £100,000. Income tax thresholds, tied to inflation, were typically increased yearly until 2021, but were frozen after the 2021 budget, leading to "fiscal drag."
This phenomenon pushes individuals into higher tax bands when they receive pay raises. Using forecasts from the Institute for Fiscal Studies, it's estimated that the freeze would leave taxpayers £4,900 better off in 2030 if thresholds had risen with inflation. The higher tax rates kick in at £20,100 higher thresholds.
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